Cato: Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers

In "Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers," Daniel Griswold, director of Cato's Center for Trade Policy Studies, writes: "For political and ideological reasons, opponents of trade liberalization have sought to exploit temporary downturns in the U.S. economy to indict the value of free trade and trade-expanding-agreements. But when we account for the passing phases of the business cycle, current indicators for worker and household well-being have continued to follow a long, upward trend. Trade expansion and growing globalization have helped raise the standard of living for a broad swath of Americans. To promote further progress for American workers and households, Congress and the administration should pursue policies that expand the freedom of Americans to participate in global markets."

 

SUMMARY:

Opponents of trade liberalization have sought to indict free trade and trade agreements by painting a grim picture of the economic state of American workers and households. They claim that real wages have been stagnant or declining as millions of higher-paying middle-class jobs are lost to imports. But the reality for a broad swath of American workers and households is far different and more benign.

Contrary to public perceptions:

• Trade has had no discernible, negative effect on the number of jobs in the U.S. economy. Our economy today is at full employment, with 16.5 million more people working than a decade ago.

• Trade accounts for only about 3 percent of dislocated workers.Technology and other domestic factors displace far more workers than does trade.

• Average real compensation per hour paid to American workers, which includes benefits as well as wages, has increased by 22 percent in the past decade.

• Median household income in the United States is 6 percent higher in real dollars than it was a decade ago at a comparable point in the previous business cycle. Middle-class households have been moving up the income ladder, not down.

• The net loss of 3.3 million manufacturing jobs in the past decade has been overwhelmed by a net gain of 11.6 million jobs in sectors where the average wage is higher than in manufacturing. Two-thirds of the net new jobs created since 1997 are in sectors where workers earn more than in manufacturing.

• The median net worth of U.S. households jumped by almost one-third between 1995 and 2004, from $70,800 to $93,100.

The large majority of Americans, including the typical middle-class family, is measurably better off today after a decade of healthy trade expansion.